Question 27: Upon termination of LCs, can Employers keep part of the payment that will be made to Employees or keep their SI books until they fulfil the obligations to Employers? If Employees cause damage to or do not return the properties, can Employers make deductions from the Employees’ salaries?

Employers’ responsibilities upon termination of LCs

Labour law prescribes the Employers’ and Employees’ responsibilities upon termination of LCs as follows[1]:

  • Within 7 working days from the LC termination date, the two parties must fully pay all the amounts related to the rights and interests of each party. The time limit for payment may be extended but not more than 30 days from the LC termination date if the termination falls into one of the following cases[2]:
  • Employers terminating operations are not individuals;
  • Employers or Employees under the influence of natural disasters, fires, hostility or epidemics; and
  • Employers that change their organisational structures, technology or terminate operations due to business reasons.
  • In addition to the obligation of paying the amounts that Employees are entitled to, Employers must conduct the procedures at the SI agency to return SI books and other papers (if any) to Employees[3].

According to the regulations above, the obligations to pay/return the amounts that are related to the rights and interests of each party lie with not only Employees but also Employers. However, in light of the fact that labour law tends to protect the Employees’ rights and interests, Employers must pay all the amounts that Employees are entitled to no matter whether Employees perform their obligations or not. In other words, the Employees’ failure to discharge their obligations will not waive the Employers’ obligations upon termination of LCs.

If Employers do not fulfil their payment obligations to Employees within 7 working days from the LC termination date, they may be sanctioned for administrative violations up to VND4,000,000 if Employees make complaints to the labour inspectorate[4]. Therefore, Employers must fully discharge their obligations no matter whether Employees discharge their obligations or not to avoid the legal risks as mentioned above.

Can Employers make deductions from Employees’ salaries for the Employees’ failure to fulfil their obligations?

Technically, Employers may not deduct the value of the properties that Employees have not returned from the salary amounts not yet paid. As prescribed by law, the deduction of salary can only be made to compensate the damage that Employees cause to tools or equipment[5]. Specifically, Employees must compensate to the tune of 3 months’ salary at a maximum based on the contract salary of the month preceding the time of the damage, by making deductions from their salaries, if they cause damage to tools or equipment with the damage value less than 10 months of the area minimum wage announced by the Government[6]. The labour law does not have any other regulations that allow Employers to deduct other amounts (other than the amount to compensate the damage as mentioned) from the Employee’s salary.

Therefore, if it is not a case where Employees must compensate damage they have caused, there will be no ground for Employers to make deductions from Employees’ salaries, and they must fully pay all the unpaid amounts to Employees. In case Employers have fully discharged their obligations and Employees have not returned the properties within the prescribed time limit and if such properties have high value and/or it is necessary to get them back, Employers may initiate a suit at the court to reclaim the properties. As prescribed by law, owners of or the subjects who have other rights to the properties can reclaim them from the possessors, users or persons who derive benefits from such properties without legal grounds[7]. However, in practice, the procedure for initiating lawsuits to reclaim properties may take a lot of time and efforts. Therefore, Employers may negotiate with Employees to reclaim the properties or ask for support from the police.

[1]Article 47 Labor Code

[2]Article 14.5 Decree 05/2015/NĐ-CP dated 12/01/2015

[3]Article 47.3 Labor Code and Article 21.5 SI Law

[4]Article 8.1(a) Decree 95/2013/NĐ-CP dated 22/08/2013 as amended and supplemented by Decree 88/2015/NĐ-CP dated 07/10/2015

[5]Articles 101.1 and 130 Labor Code

[6]Article 130.1 Labor Code and Article 32.1 Decree 05/2015/NĐ-CP dated 12/01/2015

[7]Article 166 Civil Code